6% Hike in Health Spending Forecast by CMS

WASHINGTON -- Healthcare spending is projected to grow at 4% through this year but increase by 6.1% next year, ending a string of historically slow growth, government economists said Wednesday.

The uptick in spending comes from expanded health coverage under the Affordable Care Act, which will cause physician services to grow by 7.1% next year, the Centers for Medicare and Medicaid Services said in the report published online in Health Affairs.

Those newly covered are expected to be younger and healthier and, therefore, devote a higher percentage of their medical spending to physician services and prescription drugs than currently insured individuals, economists said.

Spending on physician services, which has grown about 4.3% annually in 2012-2013, will spike to 7.1% growth in 2014, the year that the ACA's coverage expansion takes hold, Wednesday's report estimated. It will remain high at 5.4% in 2015 and average 6.2% from 2016 to 2022.

Growth in doctors' services was 3.9% in 2011, 3.1% in 2010, and 3.5% in 2009, CMS has said in the past.

CMS's forecasters added Wednesday they expect health delivery reforms to only slow spending a small amount in coming years, and that health spending will rebound once a sluggish economy returns to full steam.

"The work that we've done has really shown that over the long run, there is a very tight relationship between economic growth and health spending growth," Stephen Heffler, MBA, director of the National Health Statistics Group in CMS's Office of the Actuary, in Baltimore, told reporters in a briefing. "Until we see evidence that that relationship has been broken, it's very difficult for us to conclude that something structural has occurred."

Overall health spending grew at 3.9% each year from 2009 to 2011, the CMS actuary said, the slowest growth rates recorded in the 52-year history of the National Health Expenditure Accounts. But CMS actuaries said they expect spending to increase as the economy rebounds and that it won't remain at those historically low levels.

Spending is projected to remain slow at 4% through the rest of this year, CMS said Wednesday. But after the ACA's coverage expansions take hold starting next year, it will jump to 6.1% and remain near 6% in 2015. From there it will continue to slow but is expected to be about 5.8% on average per year from 2012 to 2022.

"Although this projected growth is faster than what we've seen in the recent past around the recession, it's still slower than the growth experienced over the longer-term history," Gigi Cuckler, MBA, economist from CMS's Office of the Actuary, said Wednesday.

Health spending grew about 7.4% per year from 1990 to just before the recession, the economists said.

Forecasters have included "some modest savings" from payment and deliver reforms some providers and payers are using now. "However, at this time, it's a little too early to tell how substantial those savings will be in the longer term," Cuckler said.

Health reform experts are still debating the effect models like ACOs and PCMHs will have on spending.

Roughly half the states have opted not to expand their Medicaid programs. Even with the lowered forecast, Medicaid spending is expected to jump 12.2% in 2014. It was projected before the ruling to rise by 18% in 2014.

By 2022, national health spending will be 19.9% of the U.S. gross domestic product, CMS projected. It is currently 17.9% of GDP.

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